Reference no: EM132838399
Assume that a firm produces an industrial product at a variable cost of $8,500 and has fixed costs of $25,000 per week. Currently, the firm sells 20 units per week priced at $10,625 per unit.
a. What is the current profitability of the firm?
b. What is the improvement to profitability if variable costs are reduced by 1 percent, holding all else constant?
c. What is the improvement to profitability if fixed costs are reduced by 1 percent, holding all else constant?
d. What is the improvement to profitability if units sold are increased by 1 percent on average, holding all else constant?
e. What is the improvement to profitability if the price is increased by 1 percent, holding all else constant?
f. In isolation, improving which aspect of the firm will have the largest positive impact on profits-variable costs, fixed costs, units sold, or price?
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